CHIẾN lược CHIẾM LĨNH THỊ PHẦN cà PHÊ của TRUNG NGUYÊNe

Trung Nguyen Coffee Corporation called as: Trung Nguyen Coffee was established in 1996 as a new coffee brand in Vietnam and has quickly built up reputation and becomes one of the most fa

STRATEGY TO CONTROL COFFEE MARKET OF TRUNG NGUYEN

I Introduction

The world has proven that coffee has actually became an industry with total transaction value is $ 80 billion worldwide, ranking second after oil industry in terms

of good value and go beyond the gold, silver and precious stones to become the invested good The industry has expanded and contains elements of finance, trade, investment, tourism, culture, knowledge economy, ecotourism, coffee travel In Vietnam, coffee is day by day becoming one of the most important economic sectors contributed $2 billion per year in GDP From coffee, many companies have developed and success including Trung Nguyen Trung Nguyen is a marvelous success of brand building in Vietnam in recent years Within less than 20 years, from a small warehouse

in Buon Ma Thuot to process coffee, Trung Nguyen has developed and presented its good in all regions of the country Trung Nguyen has made a spectacular entry in the history of buiding brand in Vietnam

Trung Nguyen Coffee Corporation (called as: Trung Nguyen Coffee) was established

in 1996 as a new coffee brand in Vietnam and has quickly built up reputation and becomes one of the most familiar coffee brands for consumers in the domestic and international markets

After more than ten years, Trung Nguyen Coffee has developed and emerged into a powerful group with six members working in major industries namely: coffee manufacturing and processing, trade tea; franchising and distribution services as well

as retail

Trung Nguyen currently contains nearly 2000 employees, 3 factories and 5 branches from the north to south of Vietnam together with one joint venture company placed in Singapore Furthermore, the company also indirectly creates jobs for more than 15,000 employees through 1000 system franchising coffee shops across the country Trung Nguyen so far has developed many products namely: creative coffee, weasel and legendee coffee, Passiona low-caffeine coffee, and G7 instant coffee Please see Trung Nguyen’s products in the Table as below:

Table 1 Products of Trung Nguyen coffee

Weasel Legendee Passiona

A research showed that Trung Nguyen is the coffee brand obtaining the biggest consumer base in Vietnam

market in the last 3 years

from 2009-2011 Nearly 10

million out of 17 million

Vietnamese households

purchased Trung Nguyen’s

coffee products for in-home consumption The researched also indicated that G7 (3in1) instant coffee has leaded the Vietnamese instant coffee market with 38% market-share

in total in 2011 (see the diagram above)

The competitive advantages of Trung Nguyen coffee: the company is facing

competitive advantage enormously by being actively control input source, manufacturing system with factories in the north and south of Vietnam which help to save costs in term of prices and quality

Declaration and positioning: During the earlier development process, Trung Nguyen

Coffee is considered sugar water with flavored coffee After years of development, Trung Nguyen coffee has always insisted his reason by giving the message and

Diagram 1 Market share of G7

leading factor that Trung Nguyen has always pursued by the coffee products have high quality , position in the market for coffee in Vietnam and around the world

What has been achieved always require Trung Nguyen to constantly move forward To maintain the advantage as well as leading coffee brand in Vietnam, Trung Nguyen has always been awarded of strategic importance for the company This will be driven growth path in the future To get a proper comprehensive strategy, the company has a detailed analysis of these factors Detailed content analysis will be presented in the following section

II Impacted Factors

1 Live cycle:

Vietnam coffee industry began to form and develop from the late 19th century by the French who make the foundation However, over the centuries, coffee and coffee industry Vietnam has not really developed until after 1990 -2000 years after Vietnam participation and integration into the world economy Therefore, the coffee industry is assessed as beginning development stages

Trung Nguyen Company provides this assessment based on evaluating specific data as follows:

According to statistics, coffee exports in 2012 reached 1,732,156 tons, valued at $ 3,672,823,086, an increase of 37.8% in volume and 33.4% in value compared with the same period last year

In 2012, Vietnam ranks the top coffee exporters to the U.S market, with 203,516 tones, achieving value at $ 459,616,328, an increase of 46.8% in volume and 34.7% in value compared with the same period on a year before, accounting for 12.5% of total export value The other bigger import markets of Vietnam coffee include Germany and Spain respectively, worth $ 427,178,275 and $ 216,281,513, an increase of 28.2% and 59.3% The average export price in 2012 is $ 2,120 / ton, down from an average price of exports in 2011 reached $ 2,191 / ton

Currently the supply of raw materials in Vietnam has a stable stage and continues to rise This proves that the coffee industry is growing fast (see diagram) According to the data shown we can see, café area and yields are increasing steadily in the years from

2004 to 2014 If

the new 2004

when the country

began to increase

acreage,

production at 700

thousand tons,

thousand tons in

2010 to 2013, the

number was close

to 1,800 thousand

tons (more than 2 times) Period 2006 - 2010 production increased but not significantly from 2010-2013 to increase the yield (see table below) This suggests that the café area and yields are still rising

Table 2 – Quantity of Vietnam coffee in phase 2005 – 2010, source: BCT

However, the actual exports of coffee in the recent time do not increase or increase but

no stability The numbers of small coffee exporters in Vietnam are very crowded with over 100 businesses but they have strong competition resulting in reducing price This situation form Trung Nguyen Coffee the ideas of thinking about the unification

Vietnam exports so that the export value will be higher both in quality and quantity From the thoughts that inspired Trung Nguyen to build a proper strategy to shape coffee exports Vietnam

Besides export markets, coffee consumption in the domestic market also showed some very encouraging data Speed domestic coffee consumption is relatively high growth and stability, crop forecasts in 2010/2011 production of domestic coffee consumption will reach 12.1 % growth over the same period last year

Instant coffee market goes up

According to the British Coffee Association, in 2000, the share of instant coffee consumption only accounts for 13 % of total coffee consumption and only 10 years later, this figure exceeded 40 %, the current instant coffee continues to accelerate strongly and threatened proportion of the product consumed traditional roasting coffee Two nations with the highest rate of consumption of instant coffee are England with 81

% and Japan with 63 %, while in the traditional U.S market, sales of instant coffee accounts for only 9 %

According to data from the International Coffee Organization (ICO), instant coffee consumption in Vietnam grew 31 % in 2010, reaching 1,583 million packs of instant coffee which accounts for 38.5 % of total consumption, roasted coffee grind up about 61.5 % Growth of instant coffee production increased by only about 4.5 % but the growth of instant coffee consumption in Vietnam has reached double digits

Diagram 2 – Total instant coffee of Viet Nam (Ton)

Source: MARD

These data were analyzed in very detail and thereby shape the strategic of Trung Nguyen coffee for the domestic market as well as exports This strategic orientation of Trung Nguyen Group will become Vietnam's leading coffee and coffee contributes to the development of Vietnam towards sustainability

2 Competitors

Up to the current period, the instant coffee market Vietnam is ongoing "nettle race" between three typical companies including VinaCafe (Bien Hoa Coffee - VinaCafe JSC); Nescafe (Nestle - Switzerland) and G7 (Trung Nguyen Company) So far, Trung Nguyen is still the market leader in Vietnam instant coffee but to maintain and strengthen the position may also exporting instant coffee to other countries that are extremely important targets After the target formed, Trung Nguyen has formed strategies developing instant coffee containing spirit and style of Vietnamese people and will offer to the world

To implement this strategy, Trung Nguyen has focused on the study of national taste This study divided into 03 main markets: the taste of Asia – expect to export to Asian countries; Taste and Europe; taste of America (North America) for soluble coffee exports to two continents Trung Nguyen also actively building a network of international distributors - has branches in Singapore and manufacturing supply chain When completed, this system will help companies to secure supplies as well as distribution system completed

For roasting coffee export industry, Trung Nguyen is currently competing in the 3 major competitors including Vietnam Coffee Corporation and over 100 small businesses as analyzed and company also has a strategy ( see part 1 )

3 Customers

In term of export market, Vietnam's coffee exports mainly to the European region, official statistics in 2013 coffee exports to the region reached 568.0 thousand tons with

a turnover of 1.2 billion (down 13.7% in volume, turnover decreased by 15.6% compared with 2012) There are 13 markets in the European coffee imported Vietnam coffee and there were 11 import market has fallen comparing to previous years, only 2

markets have increased in 2013 including British market (increased by 13.1% in volume, 6.9% increase in turnover) and Russia (increased by 11.2% in volume, an increase of 13.0% in turnover)

Asia is the second largest region importing Vietnam coffee in 2013, reaching 269.0 thousand tons with a turnover of 598.9 million, down 21.8 % in volume and 20.6 % of the metal value compared with 2012 Trung Nguyen has 11 regional markets of Asia import coffee from Vietnam, in which Japan and China are the two leading importers, specifically exports to Japan reached 78.1 thousand tons turnover of U.S $ 167.6 million, to China reached 37.1 thousand tons with a turnover of 96.2 million Notably, exports to India and Israel show signs of growth compared to 2012, exports to India increased by 3.8 % and 4.8 % of turnover, to Israel with 11.0 % growth increasing and 16.8 % of turnover

Besides, the company also targets the African market This is a new market and potential For the turnover, the market has accounted for over 10 % of export revenues

of Trung Nguyen

It is founded that the maintenance and development of traditional markets and new markets is vital for development of Trung Nguyen coffee Trung Nguyen's strategy is to focus research, search and maximize the market

4 Products for replacement

The current market appears many drinks that can replace coffee for example:

 First, the bottled product made from chocolate contains a large amount of increased tone, stimulates the brain produces endorphins - an endogenous hormone ( often called the " hormone of happiness " ) makes people manic happy, fun and increase energy reserves and can affect drinking coffee

 Second, red apples contain vitamins and fiber, are suitable to eat morning, on an empty stomach In the list of “substitute coffee " also have oatmeal , cereal , fish, chicken, green tea So outside café , customers can choose the drinks to gain weight fair in each breakfast

Besides, there are also a lot of other bottle drinks can replace coffee However, if you look at the fact that most customers use coffee as a habit to replace the crops that will not affect the consumption of coffee

However, these analyzes also put Trung Nguyen on new opportunities Strategic diversification from coffee products was formed Trung Nguyen is studying the market and will provide bottled coffee products are very handy and compete directly with existing drinks

5 Supply resources:

Supply is the coffee growing areas are mainly distributed in the Central Highlands and some other localities like Quang Tri, Binh Phuoc or Dien Bien province Currently the Central Highlands is the largest coffee plantation where are the majority of the country's area Other provinces also started planting coffee like Quang Tri as 1% of the total area The new province in the north also started planting coffee but untapped Therefore these areas are not located in the local map of Vietnam coffee plantation Details of the coffee growing regions are shown in Figure below

6 Competitors:

Beside the domestic competitors, currently, there are some foreign investors who have been or prepared to invest in Vietnam Therefore, they will become competitors of Trung Nguyen

II PEST Analysis

1 Economic Environment

According to economists, the economic environment is the entire economic factors such as employment, income, inflation; interest rates, productivity, and wealth affect the buying behavior of consumers and the organization Overall, Vietnam’s economy

in 2013 is growing stable Production growth and the positive changes going on in the last year, however, economic growth is still low

Stable macroeconomic Environment stability:

The inflation index is remained stable The consumer price index (CPI) is slowed down in November, at 0.34 % compared to October, up 5.5 % compared with 12/ 2012 increased 5.78 % compared to the same period in 2012 Thus, inflation in 11/ 2013 is slow at the second lowest since 2003 back here (after 2009)

Interest rates have fallen steadily, stabilizing the exchange rate, balance of payments improved Ceiling deposit interest rate has been lowered from 14 % to 12 % interest rate credit fell from a year earlier, this trend is being pushed imaginative direction and flexibility of market fluctuations and take know of inflation This is an opportunity for companies to access concessional loans of banks, maintain and expand production The infrastructure of the economy as well as factors is affecting the purchasing power

of the market If poor infrastructure increases the costs of production and consumption

of products, product price increases, which will reduce the products competitiveness in the market Once the service distribution and promotion has been slow due to the impact on markets of infrastructure will make the product difficult to access or slow access to the company's products

Sector Environment

Due to the slowing economy in most developing countries, so the situation is declining export coffee Coffee exports of Vietnam in 2013 reached 1.3 million tons with an export turnover reached $ 2.7 billion, down 24.8 % in volume and 25.9 % in value If compared with the previous year, 2013 was the year that coffee industry has been a significant decline in export volume and export value

Review within five years, exports of Vietnam's coffee growing growth in the first 4 years (from 2009 to 2012) with an average growth rate of 17.7 % / year This suggests that the main market imported goods is increasingly popular coffee Vietnam and the number of export markets in coffee growing expanded (2008, coffee exports to Vietnam 74 market, by the end of 2013 had reached 86 markets) However, the world economic situation difficult , consumer demand for this item in the import market is significantly reduced due to the economic downturn , natural disasters diseases ( like rain ice , water shortage , rust ) that seriously affects the productivity and quality of coffee products leading to the country's coffee exports in 2013 we both volume decline , both in terms of metal value

2 Political Environment

Currently, Vietnam's political stability is considered This is a very basic element to attract foreign investment and is highly appreciated Survey locations with the most attractive investment investors Japan by the Trade Promotion Organization of Japan (JETRO) done this clearly acknowledged And the factors attractiveness of this business is due to political stability

Policy innovation, opening with political stability, a safe living environment, security

is the underlying cause that amount of capital foreign direct investment into Vietnam

In November 2013, this capital gain of $ 10 billion, an increase of 9.9 % compared to the same period last year Export turnover increased by 24.5 % in 11 months, a growth rate much higher growth rate under high goals and many times the GDP growth rate Unstable political situation in Vietnam has decisive significance in the economic development, employment income for workers, increasing consumer demand of society This also impact on the creation and implementation of the strategies the Vietnamese enterprises

3 Social Environment

Vietnam's social strides bass levels on human index In addition, information systems and communications to people are very good Therefore Trung Nguyen needs more conditions to reach customers

4 Technology Environment